For most of the year, you can only change your healthcare coverage if you experience a qualifying event like a birth or marriage. However, for millions of Americans, open enrollment is right around the corner. This is the only time of year when you can freely make adjustments to your healthcare plan for the upcoming year without needing a specific reason.

Therefore, it’s time for my annual reminder to consider something different.

Healthcare plans come in many forms, ranging from those with low deductibles and low co-payments to high-deductible plans where you must meet a significant threshold before any coverage kicks in.

Throughout most of my career, I opted for the top-tier plans, aiming to provide comprehensive coverage for my family. While more expensive, I viewed these plans as insurance against catastrophic events. However, I eventually realized I had been making a costly financial mistake.

The High-Deductible Health Plan (HDHP)

A few years ago, my employer provided tools to help compare the overall costs of various plans. The premium for the deluxe plan I typically chose was over $800 per month for family coverage. On the lower end of the spectrum, the HDHP cost only $364 a month, resulting in an annual savings of $5,300.

With no medical expenses, I would already be $5,300 ahead by choosing the HDHP. The HDHP had a $3,000 family deductible, while the deluxe plan had a $1,500 deductible. So, the annual savings still heavily favored the HDHP.

After running multiple scenarios—from minimal to extensive healthcare needs—the HDHP consistently had lower overall costs. Even in catastrophic situations involving extended hospital stays, the HDHP proved to be more cost-effective. Both plans paid 90% of costs after the deductible, but the $5,300 premium difference, combined with the deductible disparity, made the HDHP the clear winner.

The Power of the Health Savings Account (HSA)

One of the greatest benefits of enrolling in an HDHP is qualifying for a Health Savings Account (HSA). Unlike the more familiar Flexible Spending Account (FSA), which has a “use it or lose it” rule, HSAs offer much greater flexibility. Contributions to an HSA are tax-deductible, the funds grow tax-free, and there are no penalties for withdrawing money for qualified healthcare expenses.

HSAs are similar to Individual Retirement Accounts (IRAs) but without the early withdrawal penalties. You can use HSA funds to pay for healthcare expenses at any time, while still enjoying the tax benefits of an IRA. This flexibility makes HSAs a superior option for many individuals.

Potential Employer Contributions

Another advantage is that many employers, including my own, make contributions to HSAs for employees who choose the HDHP. My employer contributes $2,000 annually to my HSA, which covers nearly half of my annual HDHP premium. This additional contribution made the HDHP an even more attractive option for me.

In 2025, individuals can contribute up to $4,300 to an HSA, and families can contribute up to $8,550. Those aged 55 and older can make an additional $1,000 catch-up contribution.

A Smart Financial Move

While anyone can contribute to an FSA, only individuals with an HDHP are eligible for an HSA. Additionally, you cannot contribute to both an HSA and a traditional FSA in the same year. The beauty of an HSA is that there is no time limit on when you can reimburse yourself for healthcare expenses. If you choose to let the money grow tax-free for years before reimbursing yourself, you can—just keep detailed records.

Moreover, unlike traditional or Roth IRAs, HSAs have no income limits, making them an ideal savings tool for high earners. If you’re comfortable with a high-deductible health plan, I encourage you to explore an HSA as one of the most powerful tax-advantaged accounts available.

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